“What’s going on guys? Pro the Doge here, A.K.A. SlumDoge Millionaire,” Glauber Contessoto declares to his hundreds of thousands of followers online.
Mr Contessoto has the kind of rags to riches tale that has drawn many people to cryptocurrency.
“It took me two months to become a millionaire.”
According to his own account, Mr Contessoto grew up poor in a family that emigrated to the United States from Brazil and was determined to make money.
He dabbled in the music business, dabbled in the stock market, and then, last year, turned to cryptocurrency — specifically Dogecoin, a digital currency based on an image of a Shibu Inu, a Japanese hunting dog, a popular internet meme.
“It made sense to me to invest in Dogecoin because it’s the very first time you have a meme and a cryptocurrency paired together,” he said.
“I call it the language of the millennials, memes. We send memes to each other all the time, it’s just the way that we communicate, and Generation Z.”
“So, I figured, okay, this is going to be the next play,” he said. “People are going to start investing in Dogecoin and it’s going to take off.
“Obviously, it helped that Elon Musk was also a fan of Dogecoin.”
Mr Contessoto initially backed his hunch about Dogecoin with a small investment.
Then he decided to sell his shares and go all in, as Musk – head of Tesla and Space X, the world’s richest man – got behind the cryptocurrency.
“[Musk] tweeted back-to-back… like on a rant where he’s saying, “Dogecoin is the future, Dogecoin is the people’s crypto. Everyone can own Dogecoin, it’s cents on a dollar,” Mr Contessoto recalled.
“And he posted a picture of a rocket to the moon, Dogecoin to the moon.”
As Musk ramped it up, that’s where Dogecoin headed; Mr Contessoto’s gamble paid off.
That’s when he announced that he had become a Dogecoin millionaire.
When Four Corners caught up with him, he was making a video promoting “Doge-apalooza”, a festival dedicated to Dogecoin.
“Sugarland Texas, if you guys hold Dogecoin, if you love Dogecoin come out and celebrate with us, we’re going to have live music!”
The irony of all this is that Dogecoin was meant to be a joke.
A young Australian tech marketer, Jackson Palmer, co-founded it to mock and satirise the hype about crypto. “We thought it would last maybe three days,” he said in a 2014 interview.
But somehow the punchline got lost.
Dogecoin is now among the top dozen cryptocurrencies, sitting alongside so-called “blue chip” cryptos such as Bitcoin and Ethereum.
At its highest point, the value of the joke crypto hit $US89 billion (124.7 billion) – an astonishing figure, given that Dogecoin has little real-world function beyond speculation.
Fad, fraud or the future?
Some say cryptocurrency is the future of money, and the technology it’s built on is destined to revolutionise the internet and the society.
Others see it as one big fraud.
Whatever the truth, it’s impossible to escape the hype.
From Formula One to football, there is hardly a sporting code these days that’s not sponsored by the cryptocurrency industry.
At the Superbowl, the championship playoff of America’s National Football League, hyper-expensive television advertising slots were taken up by rival cryptocurrency exchanges using celebrities to encourage people to dive in.
“Fortune favours the brave,” actor Matt Damon opined.
Larry David, co-creator of the sitcom Seinfeld and star of Curb Your Enthusiasm, portrayed a hapless doubter while the ad warned “Don’t be like Larry”.
That kind of advertising disturbs John Reed Stark, a lawyer in Washington DC who has spent most of his career at the intersection of law and technology.
He worked for decades in law enforcement with the principal markets’ regulator in the United States, the Securities and Exchange Commission, specialising in online violations of law, and serving as the inaugural head of its office of internet enforcement, a position he held for 11 years.
At the time, he considered himself a “technology evangelist” — but he now proselytises against cryptocurrency.
“I believe it’s one big Ponzi scheme,” he told Four Corners.
“That’s how I feel about cryptocurrency.
“It has no underlying intrinsic value. And the main reason that people invest in cryptocurrency is because they believe that there’s a greater fool out there.
“It’s something at the SEC we used to call the Greater Fool Theory — that you believe there’s a greater fool out there who will pay more, whatever the cryptocurrency might be.”
Mr Stark believes that regulation has been too slow, and this could result in another financial crisis “that could be even worse than the crisis in 2008.”
Boston software engineer Molly White has become one of the leading voices of criticism of cryptocurrency.
She had considered crypto and the blockchain technology on which it’s built of marginal interest, until she noticed, and began to chronicle, the number of scams, hacks and frauds being perpetrated in the crypto sphere.
“It felt like people were being just taken for a ride,” she said.
“Day after day after day, it was like, one scam, one day, two hacks the next day.”
Ms White is concerned about the way cryptocurrency is being marketed to people who are neither tech savvy nor sophisticated investors able to understand the risks they’re exposed to.
“I don’t typically refer to cryptocurrencies as investments because I see them a lot more like gambling,” she told Four Corners.
“But with gambling, there’s regulation involved, the casinos can’t just take your money and run away with it. They are expected to actually play a game, and the odds should be about what they say they are.
“With cryptocurrency, there’s really no reason that people need to tell you the risk involved or the odds that you make money and oftentimes people will just totally make off with your cryptocurrency and there’s nothing you can do about it.
“There’s no failsafe.”
Mr Stark is also concerned is that cryptocurrency is facilitating crime.
“All types of horrific crimes from ransomware attacks, and terrorism, and evading sanctions during war time, which is what’s going on right now, drug dealing, sex trafficking. All of those things are now a lot easier to do because of cryptocurrency.”
‘Classic pump and dump scheme’
Scams involving cryptocurrency have surged over the past year, according to data from a leading crypto analytics firm Chainalysis.
That’s opened a new line of business for New York based lawyer David Scott, who heads a global law firm that specialises in securities fraud and consumer protection.
“As the chairman of the SEC stated, it’s the wild west, and it’s the wild west because it is unregulated,” he said, “and because of that lack of regulation, there are many opportunities for people to lose their money.”
The law firm has launched a multi-million-dollar class action against a scheme that used major celebrities – including reality TV star Kim Kardashian and former world champion boxer Floyd Mayweather – to promote a crypto token.
Mr Scott describes it as a cryptocurrency version of an old-style stock market manipulation tailored to the zeitgeist.
“To our mind, as we alleged in our complaint, it appears to be a classic pump and dump scheme.”
According to the complaint, a business called EthereumMax paid celebrities to whip up hype about their “Emax” token.
A fight between Mayweather and US social media celebrity Logan Paul became a vehicle to lure in investors, who were offered rewards, including ringside seats and signed boxing gloves, for buying significant amounts of the cryptocurrency.
Amid a buying spree, the price soared.
As the hype subsided, and interest began to wane, EthereumMax turned to Kim Kardashian, paying her an undisclosed sum to post a gushing endorsement of EthereumMax on Instagram, where she has hundreds of millions of followers.
“Imagine the influence that she has,” Mr Scott said.
“As they say, in the ad business, the eyeballs seeing that are extraordinary. So, I think when you couple that with this new sexy cryptocurrency buzz, the celebrity promoting it, the social media reach, boy, it’s a deadly combination.”
Kardashian’s post brought in new investors and pumped up the volume of trading. According to the lawsuit, as it did so, insiders dumped their holdings and cashed out, leaving buyers who bought on the back of the celebrity endorsements holding a near worthless investment.
“The insiders sold their tokens, made money, when it was all said and done, those people who bought on the good news and on the news that was being spread by the promoters, suffered extraordinary losses,” said Mr Scott.
In the volatile cryptocurrency market, you don’t need to be on the end of a scam to lose money.
Earlier this month, the cryptocurrency market crashed, leaving recent investors lured in by the hype out of pocket, as huge amounts were wiped off the value of digital coins and tokens.
Amid the rout, Mr Contessoto was counting the cost.
Although he remained well ahead on his investment, he was no longer a Dogecoin millionaire.
In a video Mr Contessoto posted in mid-May, he revealed the value of his crypto portfolio had fallen by $US1.8 million in a year — but he had still made $US281,000 on his investment.
“Woo-wee, a bloodbath, right? Blood in the streets, right?” he told his many online followers in a video.
“It’s getting crazy in this crypto market, right? It’s getting sweaty in here; you know what I’m saying?”
He also showed them that he was doubling down, recording himself as he forked out another $US10,000 on Dogecoin.
“I’m a long-term holder, you guys know that, know what I’m saying, diamond hands?” he said on the video, “and I’m going to keep on holding it.”
It was at once a show of faith and a marketing strategy.
“People who invest in cryptocurrencies are enormously motivated to speak highly of them,” Ms White argues, “because as the more people who also invest in that cryptocurrency, the because the more their investment goes up.”
Ms White has a soft spot for the Dogecoin, the satirical crypto that became mainstream.
“I see Dogecoin as more honest about what it actually is,” she said.
“It’s really brought to the forefront that something that has no intrinsic value, that’s not tied to any real-life asset or service, that is just plainly a joke, has become on par with some of the more serious cryptocurrencies like Bitcoin or Ethereum.
“They’re not all that different. One of them is just more plainly based in the shared belief that a silly dog token will go up in value.”
Watch the full investigation on Four Corners tonight at 8:30pm on ABC TV or livestream on the Four Corners Facebook page.
No Comments Yet